PERTH (miningweekly.com) – Australian oil and gas major Woodside has struck a deal with infrastructure investor Global Infrastructure Partners (GIP) to sell a 49% stake in the Pluto Train 2 joint venture (JV).

Pluto Train 2 is a key component of the proposed Scarborough development and includes a new liquefied natural gas (LNG) train and domestic gas facilities to be constructed at the existing Pluto LNG onshore facility.

The estimated capital expenditure for the development of Pluto Train 2 from the effective date is $5.6-billion.

In addition to its 49% share of capital expenditure (capex), the JV arrangements would require GIP to fund $835-million in additional construction expenditure, with Woodside’s share of capital spend to reduce accordingly.

The final quantum of GIP’s capital contribution would be dependent on interest rate swap and foreign exchange rates on the date of the final investment decisions for Scarborough and Pluto Train 2, Woodside said on Monday.

If the total capex incurred is less than $5.6-billion, GIP will pay Woodside an additional amount equal to 49% of the under-spend. In the event of a cost overrun, Woodside will fund up to $835-million in respect of a 49% share of any overrun.

Delays to the expected startup of production will result in payments by Woodside to GIP in certain circumstances.

Woodside told shareholders in a statement that the development of Pluto Train 2 was expected to be supported by a long-term processing and services agreement to be entered into between the Pluto Train 2 and Scarborough JV.

The transaction includes a number of other related agreements between Woodside and GIP including a project commitment agreement (PCA). The PCA includes provisions for GIP to be compensated for exposure to additional Scope 1 emissions liabilities above agreed baselines, and to sell its 49% interest back to Woodside if the status of key regulatory approvals materially changes.

“We are very pleased to have GIP joining us in the development of Pluto Train 2, given their impressive credentials and extensive global capability. We are looking forward to a successful, long-term relationship with them,” Woodside CEO Meg O’Neill said.

“GIP’s investment will help fund the expansion of the world-class Pluto LNG facility. The LNG supplied from the expanded Pluto facility will assist our customers to achieve their decarbonisation goals through the energy transition.

“The sale of the interest in Pluto Train 2 is a significant milestone as we progress towards a final investment decision (FID) on our Scarborough development, further de-risking this globally competitive investment,” O’Neill added.

“The development of Scarborough gas through Pluto Train 2 will deliver significant value to our shareholders, create thousands of jobs in Western Australia and generate tax revenues for decades to come.

“Pluto Train 2 will be one of Australia’s most efficient LNG trains and with Scarborough gas containing virtually no carbon dioxide, this is an attractive investment in a decarbonising world,” she said.

GIP chairperson and MD Adebayo Ogunlesi said LNG is expected to play a critical role in transitioning the world toward carbon neutrality over the coming decades.

“We are delighted to partner with Woodside, a global leader in operating responsibly and safely, to develop this world-class facility.

“We are particularly attracted to the modern and efficient technologies Woodside has adopted, making LNG from Pluto Train 2 one of the lowest carbon intensity sources of LNG delivered into Asia. We fully support Woodside’s net zero emissions targets for Pluto LNG including Pluto Train 2, and all its wider commitments to the community,” he said.

Completion of the transaction is subject to conditions precedent including FIDs for the Pluto Train 2 and Scarborough developments, Foreign Investment Review Board approval, execution of the Scarborough PSA and relevant government and regulatory approvals.

Following completion Woodside will hold a 51% participating interest in the Pluto Train 2 JV and remain as operator. Completion of the transaction is expected to occur in January 2022.